Human capital explains most income gaps

New development‑accounting work (Lagakos & Schoellman, NBER) argues that improved measurement of inputs — especially human capital and management — raises the share of cross‑country GDP‑per‑worker differences explained from ~30% (classic specs) to roughly 55–70%. That implies much less of the gap is unexplained 'TFP' and more is attributable to measurable inputs and institutions. — If inputs (education, skills, management) account for most income differences, policy focus should shift from vague productivity appeals to concrete investments in human capital, measurement, and organizational improvement.